Apple CEO’s Pledge to Make Macs in the U.S. Seen Adding 200 Jobs

By Jeff Green, Adam Satariano and Peter Burrows -
Dec 8, 2012

The pledge by Apple Inc. (AAPL) Chief
Executive Officer Tim Cook to invest in making Mac computers in
the U.S. will probably create about 200 jobs if he follows the
pattern of companies such as Lenovo Group Ltd. and LG Chem Ltd.

The investment plan, unveiled by Cook on Dec. 6, marks a
reversal for Apple, which made and assembled many products in
the U.S. until the late 1990s. It shifted manufacturing to Asia
to take advantage of the region’s expanding industrial base and
lower labor costs.

Cook, who took over from Steve Jobs last year, said in an
interview with Bloomberg Businessweek that Apple will work with
partners on the project and put in at least $100 million of its
own money. Outside involvement may increase the total.

The investment “sounds like a 200-job operation with about
a million-unit output,” said Dan Luria, a labor economist at
Michigan Manufacturing Technology Center in Plymouth, Michigan,
who studies factory operations. Apple will probably rely on tax
breaks and other incentives for the facility, he said.

Even some foreign companies are taking early steps toward
building in the U.S. some products that had been handled abroad.
Lenovo will assemble computers in Whitsett, North Carolina,
starting next year, while LG Chem and other companies plan to
create batteries for hybrid and electric cars in Michigan.

Indiana, Texas

Hewlett-Packard Co. works with Foxconn to manufacture
personal computers in Indianapolis for U.S. markets. The
facility employs 1,300 workers and will build 2.9 million PCs
this year, said Tony Prophet, senior vice president for Hewlett-
Packard’s printing and personal systems.

Cook didn’t identify the specific Mac product or a location
for the manufacturing. About 70 percent of Apple’s revenue now
comes from iPhone and iPad sales.

Apple has taken other steps to beef up operations in the
U.S. It’s adding about 3,600 support workers over the next
decade in Austin, Texas, where it already has a 3,500-person
customer-support center. The company also gets chips for some
products from a nearby $14 billion Samsung Electronics Co. (005930)
facility.

Precedent Setting

“One of our major recruitment targets is general
manufacturing,” said Dave Porter, senior vice president of
economic development for the Austin Chamber of Commerce,
declining to discuss any specifics about Apple. The chamber
promotes a five-county region that includes Austin.

While Apple’s commitment could set a precedent for
electronics suppliers, it probably doesn’t presage a large or
rapid shift of production back to the U.S., said Michael Marks,
the former CEO of Flextronics International Ltd., which was the
largest contract manufacturer in the world before the rise of
Foxconn. He also estimates $100 million may create about 200
jobs.

“This is a trend that will start in little ways like this,
and will pick up steam as suppliers move here,” Marks said.
“But this does not herald a booming return of high-volume
manufacturing to the United States.”

Attempting to create jobs in the U.S. also stands to
burnish Apple’s image, Hasler said.

“There is some PR aspect to it and there is also a lot of
data out there that show it can make good business sense from a
manufacturing perspective to bring that back to the U.S.,”
Hasler said.

Foxconn Faulted

Apple’s manufacturing operations in China have been a
source of criticism, with worker- and labor-rights groups
faulted the company and Foxconn for the conditions at facilities
where its products are made. Apple earlier this year enlisted
the Fair Labor Association, which has overseen the apparel
industry for years, to audit its factories.

Cook, who took over as Apple’s CEO in August 2011, has long
been in charge of the company’s supply chain. He gained the
trust of Apple co-founder Steve Jobs by managing component
purchasing and overseeing work with suppliers.

Some parts for Apple’s products are already made in the
U.S., Cook said in the interview. For instance, the glass for
the iPhone and iPad is made in Kentucky, he said.

Lenovo’s plan to build computers in North Carolina is a
good template for Apple, said Willy Shih, a Harvard Business
School management professor, who is traveling the U.S. as part
of a Harvard initiative to get companies to bring back
manufacturing as a way to rekindle innovation.

Lenovo Assembly

Lenovo will be producing “hundreds of thousands” of
notebook computers and other products next year with two shifts
totaling about 100 people, said Mark Stanton, Lenovo’s director
of global supply-chain communications. The operations in North
Carolina will still be dwarfed by plants in places such as
Mexico that make millions of units, he said.

Lenovo is adding a $2 million assembly line to an existing
distribution center it built in 2008 for about $40 million, he
said. Depending on the demand, the facility may add a third
shift in the future, Stanton said. Another 15 skilled jobs will
be created.

“The state of the industry right now for this type of
operation is mostly people, and the skilled people are here,”
he said. The manufacturing jobs pay about $32,000 a year, with
the skilled positions in the $65,000 range, he said.

Cutting Costs

It’s no longer a pipe dream to bring some manufacturing
back to the U.S. thanks in part to improvements in automation
gear, said Pam Gordon, founder of electronics manufacturing
consulting firm Technology Forecasters Inc. At the same time,
the costs of making goods overseas are rising due to higher
transportation expenses and increased consumer concern about
worker safety and environmental responsibility, she said.

“You could make the case that you could get a lower cost
of total ownership,” Gordon said. “Besides strengthening the
brand, they would have lower shipping costs and leaner
inventory,” making it easier to respond to changing demand
patterns, she said.

Government funding also serves as an incentive for
companies, Luria said. In Michigan, for example, LG Chem has
agreed to match a $151 million investment from the U.S.
Department of Energy to build battery cells for General Motors
Co.’s Chevrolet Volt electric car, according to the U.S.
Department of Energy.

That plant, which is in a testing phase, has about 200
employees, the company said in statement. Once it’s fully
operational, the factory will qualify for Michigan tax breaks
too.

Manufacturing Rebound

Even before Apple’s investment kicks in, there’s evidence
of a rebound in manufacturing. The U.S. has gained 496,000
manufacturing jobs since January 2010, when factory jobs slumped
to a seven-decade low, according to U.S. Labor Department data.
The shift of jobs back to the U.S. from China may contribute to
2 million to 3 million new jobs by the end of the decade, Boston
Consulting Group said in a March report.

“Maybe we’re going to learn how to do it here again,”
said Shih of Harvard. “And that’s just what we should be
doing.”